"The whole industry is in lock step that there's a pretty serious problem with public adjusters in Florida and their effect on claims handling," said Katie Webb, whose firm Colodny, Fass, Talenfeld, Karlinsky & Abate, represents FPCA.

Public adjusters say they are being unfairly targeted because they help policyholders get claims paid. Chip Merlin, a Tampa attorney who represents policyholders said the measures are a "potential nuclear bomb" for policyholders and public adjusters: "This proposed law is a means for insurers to prevent policyholders from having access to professional help at the time they most need it."

The legislation would:

Prohibit public adjusters from recruiting customers by phone or in person unless it's someone they know already or a family member.

Bar them from sending mailers within 30 days after a hurricane. Ads sent after can't include the public adjusting firm's record in obtaining claim settlements for policyholders. They must say "ADVERTISEMENT" in a large, red letters, and can't resemble legal documents.

Close a loophole on the state's fee caps for public adjusters. The fees are capped at 10 percent for hurricane claims and a 20 percent for other but the fee limits don't apply to re-opened claims.

“We have seen a tremendous amount of fraud and short of fraud, a simple over-inflation of claims and it is being drive by public adjusters,” said William Stander, an associate vice president of PCI.

A recent state study found that in the past six years, the Division of Insurance Fraud received 937 complaints about fraud related to public adjusters from insurers and others, investigated 269 of them and made 31 arrests from 2004 to 2009.

The comments to that article are interesting and reflect the extremely polar views people seem to have on the issue of public adjuster regulation.

Here in New York, Regulation 10 (11 NYCRR Part 25) allows public adjusters to solicit by telephone or in person between the hours of 8:00 a.m. and 6:00 p.m. The only prohibitions of public adjusters' methods of doing business in New York State are found in section 25.3 of Regulation 10:

§ 25.3 Prohibition as to methods of doing business

(a) No person licensed to act as a public adjuster, or named as a sublicensee in any public adjuster's license shall, between the hours of 6 p.m. and 8 a.m., directly or indirectly, solicit the adjustment of a loss from an insured or from any broker or other person, whether by personal interview, by telephone or by any other method, nor shall accept any order, commission or contract for the adjustment of any loss which is within the scope of section 2108 of the Insurance Law, nor shall permit his or its agent, representative or employee to do so.

(b) No such licensee or sublicensee shall divide any fee or give any fee, commission or other compensation to any person, firm or corporation for procuring, or assisting in procuring, the adjustment of any such loss for any such licensee or sublicensee, unless the person, firm or corporation to whom such fee, commission or other compensation is given or paid had at the time when the loss occurred:

(1) a public adjuster's license issued and in force pursuant to section 123 of the Insurance Law; or

(2) an insurance broker's license issued and in force and such licensee either was the broker of record in placing the insurance which was involved in the adjustment of the loss, whether or not designated in writing to act for the insured, or was designated to act for the insured in writing before a loss occurred.

(c) No such licensee or sublicensee shall be employed, or associated with, any person, partnership, corporation, member, officer, director or stockholder, whose license as a public adjuster has been revoked by the Superintendent of Insurance of New York. Any violation of this Part shall be deemed a ground for refusal to issue or renew, or for revocation or suspension of, a public adjuster's license.

There has been no change to any section of Regulation 10 since it was promulgated 24 years ago on February 24, 1986. To the contrary, I know of several New York insurance law changes that were proposed and enacted due to the lobbying efforts of New York public adjusters, including the addition of subsection (g) to New York Insurance Law § 3404, which was introduced in an attempt legislatively to overrule decisional law that I had obtained for insurer clients.

The supporters of the proposed Florida legislation contend the new rules are needed to address what they assert is the intentional inflation of claims by public adjusters. Here in New York, a public adjuster's fraud in deliberately exaggerating or inflating a claim may be imputed to the insured customer either for the purpose of recovering paid fraudulent claims (Chubb & Son, Inc. v. Consoli, 283 AD2d 297 [1st Dept. 2001]) or denying them (Latha Restaurant Corp. v. Tower Ins. Co., 38 AD3d 321 [1st Dept. 2007]).

Does anyone think we'll ever see changes in New York similar to those being proposed in Florida? Should we? Before commenting, you should read the January 2010 report of the Florida Legislature's Office of Program Policy Analysis & Government Accountability, which concluded that public adjuster representation in Citizens Property Insurance Corporation (Florida's homeowners' insurance "safety net" created in 2002 to offer property coverage to Floridians without private insurance options) claims extended the time to reach a claim settlement but increased payments to policyholders for catastrophe (hurricane) claims. Are increased payments to policyholders in public adjuster-represented claims due only to public adjuster fraud or inflation, or are insurers not paying their policyholders the full amount of their losses? Public adjusters market to policyholders based on the widely held notion that insurance companies will try to pay less than they owe. Regardless of whether that notion is warranted, the over quadrupling of the number of licensed public adjusters in Florida since 2004 likely has something to do with policholders' mistrust of insurance companies' motives and practices in settling property claims, at least in regard to hurricane losses. Currently, Florida has 15.9 public adjusters per 100,000 residents compared to New York's 2.4.

When may a negative or limiting policy definition be considered an exclusion subject to the timely disclaimer and denial requirement of New York Insurance Law § 3420(d)(2)? When it negates liability coverage that the policy otherwise provides. In a rare insurance coverage decision from the Second Circuit United States Court of Appeals, the court ruled that not all policy definitions that limit coverage are exclusions. The two in this case -- the "Hired Auto" and "Non-Owned Auto" definitions -- are not.

If under a liability policy issued or delivered in [New York State], an insurer shall disclaim liability or deny coverage for death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this state, it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant.

On November 3, 2005, Brian Blakely crashed his pickup truck into Peter Slingerland’s car in Kingston, New York. Blakely was driving the truck in the course of his work for his company, Blakely Pumping, as he frequently did. Slingerland and his wife brought a personal injury action against both Blakely and Blakely Pumping.

In a letter dated March 18, 2006, Blakely Pumping requested that NGM Insurance Company defend the action pursuant to an insurance policy for "Businessowners Liability Coverage” that Blakely Pumping had purchased from NGM. The policy generally covered liability for personal injuries but contained a section entitled “Exclusions” that expressly negated coverage for damages “arising out of the ownership, maintenance, use or entrustment to others of any ... ‘auto’ ... owned or operated by or rented or loaned to any insured.” Blakely Pumping, however, had also purchased an endorsement from NGM that modified the policy; the Endorsement extended coverage to bodily injury arising from the use of a “Hired Auto” or a “Non-Owned Auto” by the company or one of its employees. The endorsement defined those terms as follows:

“Hired Auto” means any “auto” you lease, hire or borrow. This does not include any “auto” you lease, hire or borrow from any of your “employees” or members of their households, or from any partner or “executive officer” of yours.

“Non-Owned Auto” means any “auto” you do not own, lease, hire or borrow which is used in connection with your business.

On March 23, 2006, NGM disclaimed coverage, based on the policy’s auto exclusion. In a letter dated July 24, 2006, counsel for the Slingerlands called NGM’s attention to the endorsement’s extension of coverage for bodily injuries arising out of the use of a “Hired Auto” or “Non-Owned Auto.” Two weeks later, NGM again disclaimed coverage, this time on the ground that Blakely was an executive officer of Blakely Pumping and, therefore, his pickup truck was neither a “Hired Auto” nor “Non-Owned Auto” as defined in the endorsement.

In July 2007, NGM commenced this action, seeking a declaratory judgment that it was under no obligation to defend or indemnify Blakely Pumping in the underlying Slingerland personal injury action. On March 24, 2009, after the parties cross-moved for summary judgment, the district court entered a judgment declaring that NGM was indeed obligated to defend and indemnify Blakely Pumping. Although the court concluded that Blakely Pumping had borrowed the auto of one of its officers and that the accident was therefore not covered under the terms of the policy as modified by the endorsement, the district court found that the policy's "Hired Auto" and "Non-Owned Auto" definitions constituted exclusions of general coverage, thereby triggering the timely disclaimer and denial requirement of New York Insurance Law § 3420(d)(2). Since NGM originally disclaimed coverage based only on the policy's auto exclusion, the district court ruled that it had "waived" its right to disclaim coverage on other grounds. Thus, the district court held that NGM’s subsequent notice of disclaimer was ineffective. NGM appealed to the Second Circuit.

In REVERSING the district court's ruling, the Second Circuit held that the district court erred in finding that the endorsement’s definitions of “Hired Auto” and “Non-Owned Auto” were exclusions triggering the timely disclaimer or denial requirement of New York Insurance Law § 3420(d)(2):

Determining whether there is no coverage by reason of exclusion as opposed to lack of inclusion can be “problematic." Worcester Ins. Co. v. Bettenhauser, 95 N.Y.2d 185, 189 (2000). We find guidance in Planet Insurance Co. v. Bright Bay Classic Vehicles, Inc., 75 N.Y.2d 394 (1990), a case that is particularly applicable to the facts before us. There, the New York Court of Appeals considered whether definitional language that did not appear in the section of an insurance policy entitled “Exclusions” eliminated coverage by reason of exclusion or lack of inclusion. Defendant Bright Bay obtained the policy in question for its fleet of rental cars. The policy defined “covered rental cars” as those rented for periods of less than 12 months. Id. at 398. One of Bright Bay’s cars was later involved in an accident while being rented for a 24-month period. The court found that, although the insurance company disclaimed coverage based on the definition of “covered rental cars” as opposed to a provision in the policy’s “Exclusion” section, the definition’s limiting language still amounted to an exclusion. Id. at 400. The court explained that the car was initially covered by the policy and only “became ‘uncovered’ upon the happening of a subsequent event: i.e., the rental ... for a lease period other than that prescribed in the policy.” Id. at 401. Since the car was at one point covered, this was not a case where there “was never a policy in effect covering the involved automobile.” Id.

In the instant case, the principal issue in dispute is whether the district court erred in finding that the Endorsement’s definitions of “Hired Auto” and “Non-Owned Auto” constitute exclusions requiring a notice of disclaimer. We conclude that the district court did err in so finding.

The Endorsement did not generally cover auto accidents; it covered only accidents arising from the use of a “Hired Auto” or “Non-Owned Auto.” Those terms were defined in such a way that an employee’s or officer’s vehicle, like Blakely’s pickup truck, could never be covered. This is not a case then where “the happening of a subsequent event” implicated a definitional term that “uncovered” a formerly covered car. Id. Rather, it is a case in which “the policy as written could not have covered the liability in question under any circumstances.” Zappone [v. Home Ins. Co.], 55 N.Y.2d [131] at 134. In short, there was no coverage “by reason of lack of inclusion,” and thus no notice of disclaimer was required. Id. at 137 (internal quotation marks omitted).

In fact, the Meier court found that other definitions in the same policy – such as the definitions of “owned vehicle,” “newly acquired vehicle,” and “temporary substitute vehicle” – were not exclusions. Id. at [454 N.Y.S.2d] 320-21. According to the court, the failure of the vehicle in question to qualify as one of these defined terms meant that there was never a “contract of insurance with the person or for the vehicle involved in the accident.” Id. at [454 N.Y.S.2d] 321. We employ identical logic in our analysis.

In New York, noncoverage grounds based on a lack of inclusion are not subject to Insurance Law § 3420(d). Disclaimers or denials based either on policy exclusions or conditions are. Although somewhat of a fine distinction, the difference between policy definitions that negate coverage and ones that merely state what is covered is an important one. The Second Circuit correctly analyzed these definitions in concluding that the policy provided no coverage in the first place for the insured's officer's use of his own pickup truck, which did not meet the policy's definitions of either a hired auto or non-owned auto.

Defendant's employee allegedly started a fire with the open flame of a torch being used for plumbing work at the Bohemia, New York residential motel owned by plaintiff's subrogor. The fire spread to other parts of the premises causing damages for which plaintiff paid its insured over $1,000,000.

Most of this decision relates to the parties' dispute over venue. Although the court agreed with defendant that plaintiff had improperly venued this insurance subrogation action in Suffolk County because neither party was a resident of Suffolk County, the convenience of certain municipal employee and volunteer firefighter witnesses likely to be called to testify in the action supported keeping the action in Suffolk County, rather than changing it to Queens County.

On plaintiff's motion for summary judgment on liability, defendant did not dispute that its employee was responsible for having started the fire, but argued that the extent of the fire damage was due to plaintiff's subrogor's negligent failure to have fire stops and incombustible material in place to retard the spreading of the fire, which were required by law. The lack of these required items, according to defendant's engineering expert, “greatly increased the speed of propagation and intensity of the fire to the point where the workmen could not extinguish it.”

While this submission does not refute the plaintiff's contention that the defendant was responsible for the origin of the fire, it does raise issues as to whether the plaintiff's subrogor was responsible, either in whole or in part, for the extent of the damages.

Accordingly, summary judgment is granted insofar as the court finds that the defendant was negligently liable for the occurrence of the fire but as to extent of the damages caused by the fire and whether the plaintiff's subrogor was responsible to any degree for the extent of the damages, those issues are left for trial.

Can a physician can be found guilty of falsifying business records in the first degree (New York Penal Law § 175.10), for submitting fraudulent medical documentation to a no-fault insurance carrier for the purpose of receiving payments for treatments that were unnecessary or unperformed? Yes, says the New York Court of Appeals. Records submitted by a health care provider to a no-fault insurer do constitute "business records" for the purpose of this statute.

Tatyana Kisina, a physical medicine and rehabilitation specialist, treated patients at IK Medical P.C., a clinic in Queens, in 2002. The facility reportedly provided comprehensive medical care to persons claiming to have been injured in motor vehicle accidents and billed New York no-fault insurers for its services. In 2003, the Attorney General investigated the clinic for insurance fraud and other related crimes, and subsequently procured an indictment against Dr. Kisina for engaging in a scheme to defraud in the first degree (Penal Law § 190.65 [1] [b]), two counts of insurance fraud in the third degree (Penal Law § 176.20) and two counts of falsifying business records in the first degree. The falsifying business records charges were based upon false consultation reports that Dr. Kisina had submitted to State Farm Mutual Automobile Insurance Company, along with verification of treatment forms seeking payment for procedures she purportedly performed on two motor vehicle accident victims.

After trial, a jury found defendant guilty of the two counts of insurance fraud in the third degree and the two counts of falsifying business records in the first degree, acquitting defendant of the scheme to defraud in the first degree charge. The trial court denied defendant's pre-trial motion to dismiss the falsifying business records counts, stating that "false records resulting from false information submitted to support a fraudulent claim is a sufficient basis for an indictment charging Falsifying Business Records." The Appellate Division affirmed defendant's conviction, and a judge of the Court of Appeals granted defendant leave to appeal to this court.

On this appeal, defendant argued that the false business records submitted to State Farm fell outside of the purview of Penal Law § 175.10 because: (1) the statute is not violated when an outsider or third party submits false information to a company to induce it to take action in reliance upon that information; and (2) the medical reports that she submitted to State Farm were not "business records" because they did not reflect the "condition" or "activity" of the recipient enterprise, but rather falsely evidence her activities and the condition of her patients.

In rejecting defendant's arguments and affirming her conviction, the Court of Appeals held:

Falsifying business records in the first degree is committed when a "person," with the requisite intent, makes or causes a false entry in the "business records" of an enterprise (Penal Law §§ 175.05 [1], 175.10). The "person" must act with an "intent to defraud," which includes "an intent to commit another crime or to aid or conceal the commission thereof" (Penal Law § 175.10; see also Donnino, Practice Commentary, McKinney's Cons Laws of NY, Book 39, Penal Law § 175.05, at 65-66). A "business record" is "any writing or article . . . kept or maintained by an enterprise for the purpose of evidencing or reflecting its condition or activity" (Penal Law § 175.00 [2]; cf. CPLR 4518 [admissibility of business records at trial as an exception to the hearsay rule]).

Regarding defendant's first claim, the Penal Law proscribes no limitation or preconditions on the types of persons who may fall within the ambit of this crime. Nowhere does the Penal Law state that "outsiders" or "third parties" not employed by or agents of the recipient enterprise are immune from prosecution under this statute. Indeed, in People v Bloomfield (6 NY3d 165, 170-172 [2006]), we rejected the "insider/outsider distinction" for the purpose of defining a false business record under the current business record statutes. We sustained a lawyer's conviction for falsifying business records of a bank of which he was not an employee or agent, notwithstanding that he maintained the records in an outside location (cf. People v Cratsley, 86 NY2d 81, 88-91 [1995] [in a rape prosecution, I.Q. tests performed by an "outsider" were properly admitted as a business record of a social service agency pursuant to CPLR 4518]).

Many other courts have similarly held that a third party's submission of fraudulent records may fall within the scope of the statute (see e.g. People v Myles, 58 AD3d 889, 890-892 [3d Dept 2009] [a consumer of electricity could be guilty of falsifying business records for bypassing the electric meter, causing it to falsely record the amount of electricity used]; People v Johnson, 39 AD3d 338, 339 [1st Dept 2007] [a co-defendant of public assistance applicant could be guilty of falsifying business records of the agency]; People v Smith, 300 AD2d 1145, 1146 [4th Dept 2002] [defendant could be convicted for falsifying the records of the public defender's office for erroneously stating his income]). We agree with the interpretation of these courts, and find that the People's position better comports with the plain language of the statute. The second and most prominent component of defendant's argument is that the records submitted to State Farm do not reflect the "condition" or "activity" of that enterprise as required by Penal Law § 175.00, but rather falsely evidence defendant's own activity and the condition of her patients. Here, the stipulated testimony from the State Farm representative supports the necessary elements of a "business record." The stipulation explains that State Farm was obligated to keep and maintain records submitted by physicians seeking payments for medical services rendered. Further, the stipulation establishes that State Farm's financial condition is affected by these false submissions, as they give rise to liabilities under its policies.

Defendant seeks support from People v Papatonis (243 AD2d 896, 900 [3d Dept 2009]) in arguing that the false medical reports she submitted do not reflect the "condition" of the receiving enterprise. In that case, the court held that misrepresentations on an employment application, wherein the defendant falsely denied having been convicted of a crime, did not fall within the ambit of the statute (see id. at 900-901). However, the falsifications in the job application did not, as here, relate to any rights or obligations on the part of the recipient agency. Here, by contrast, there exists sufficient evidence establishing that State Farm "kept or maintained" the consultation reports along with the claim forms, and that they evidence or reflect "its condition" — specifically its legal obligation to reimburse medical providers for services. The falsifying business records conviction was, therefore, sustainable under the circumstances presented.

Reduces from two to one the number of non-family passengers under age 21 riding in a motor vehicle operated by a junior license holder when not accompanied by a licensed parent or guardian;

Eliminates the limited use junior license and require that a junior permit be held for at least 6 months before a junior or senior license may be issued; and

Increases the number of supervised driving hours before scheduling a road test from 20 to 50 hours, that includes 15 hours of driving after sunset.

Effective November 1, 2009, it is illegal for all drivers in New York State to text or use any portable electronic device while the vehicle is in motion.

According to NYS DMV Commissioner David Swarts' explanatory video, " The intent of this new law, called the Graduated Driving Law, is to help prepare our young drivers for the life-long responsibility of driving. The rationale behind these changes is very simple. Motor vehicle crashes are the number one cause of death for teens. The crash fatality rate is highest for 16- to 17-year-olds within the first six months of getting their license. These changes strengthen the current law and address the main causes of teen driver crashes-distractions and inexperience."

Friday, February 19, 2010

Readers: this is an interactive post. Can you spot the bad penny in this decision? The ruling that diverges from established tenets of New York insurance coverage law? The part that raises one or both of your eyebrows and evokes an audible "huh?" when you read it? One of the components of this decision stands alone as the Third Department's own rule of law. I'll give you a hint. It's the issue for which the Third Department cites only its own cases, perpetuating what I believe is a relatively longstanding error of insurance coverage law, at least in the Third Department. It's like a bad penny that keeps showing up. You know what they say about repeating something often enough.

If you think you've spotted the peculiar rule, leave a comment on this post. First correct answer wins something. I don't know what yet, but it'll be something. Let me make this a multiple choice quiz. The component issues/rulings from this decision, and thus your answer choices, are:

Regardless of whether it must ultimately indemnify the additional insured Village of Brewster in the underlying property damage actions, Virginia Surety Company must defend the Village because the allegations of the underlying complaints are what trigger Virginia Surety's exceedingly broad duty to defend.

Having failed to establish as a matter of law that there is no possible factual or legal basis on which it might eventually be obligated to indemnify the Village under any policy provision, Virginia Surety must defend the Village in the underlying actions, with the issue of indemnification to await the proof at trial in those actions.

Virginia Surety waived or is precluded from asserting any policy exclusions not raised or invoked in its original disclaimer.

Coverage for the Village under Virginia Surety's policy is primary and must be exhausted before the Village's own insurer is required to contribute under its policy.

Virginia Surety must reimburse the Village's insurer for costs incurred to date in defending the underlying actions.

See? You already have a 20% chance of picking the right issue. Answers without explanations, however, won't count. I'll re-post this case one week from today, on Friday, February 26th, with my identification and explanation of the bad penny. Until then, have a look at the decision by clicking on its link above and let us know what you think.

Most liability policies provide for the payment of interest on judgments against insureds But is the interest paid on the full amount of the judgment, or only on the judgment amount not exceeding the policy limit? Insurers may look to their policy language for the answer, but policy language may not answer the question for New York auto policies.

An "owner's policy of liability insurance", as defined in section 311 of the Vehicle and Traffic Law, shall contain in substance the following minimum provisions or provisions which are equally or more favorable to the insured and judgment creditors, so far as such provisions relate to judgment creditors:

(b) With respect to such insurance as is afforded, the insurer, subject to the policy terms shall: defend any suit, with the right to make such investigation, negotiation and settlement as it deems expedient; pay all premiums on attachment bonds and appeal bonds; pay all expenses incurred by the company, all costs taxed against the insured in any such suit, and all interest accruing after entry of judgment until the insurer has paid or tendered or deposited in court such part of such judgment as does not exceed the applicable policy limits; pay expenses incurred by the insured for first aid to others at the time of accident; and reimburse the insured for reasonable expenses other than loss of earnings, incurred at the company's request. The amounts so incurred under this subdivision, except settlement of claims and suits, shall be payable by the company in addition to the applicable policy limits.

(6) All interest on the full amount of any judgment that accrues after entry of the judgment in any "suit" against the "insured" we defend, but our duty to pay interest ends when we have paid, offered to pay or deposited in court the part of the judgment that is within our Limit of Insurance.

Robyn Schiffer sued Sunrise Removal and its employee for personal injuries she sustained in an accident with a Sunrise Removal truck. At the time of the accident, Lancer insured the truck with a liability coverage limit of $100,000. Prior to trial of the Schiffer action, counsel for Sunrise Removal offered the $100,000 policy limit to settle the matter. Schiffer rejected the offer and the case went to trial, resulting in a jury verdict for Schiffer in the amount of $776,858.05. Judgment was entered on September 5, 2007. A subsequent appeal by Sunrise resulted in an affirmance.

Sometime in 2009, Lancer commenced this declaratory judgment action for a declaration that it had no obligation to pay interest above its liability limit of $100,000, an order permitting it to deposit the policy liability limit into court, and a declaration that it was released from liability. Schiffer answered and asserted a counterclaim seeking a declaration that Lancer was obligated to pay interest on the full amount of the judgment in addition to its $100,000 policy limit. Both parties moved for summary judgment.

In granting Schiffer's motion and ruling that Lancer was obligated to pay 9% statutory interest on the entire $776,858.05 judgment from September 5, 2007 until the date of commencement of this action, Nassau County Supreme Court Justice Angela Iannacci held:

Conversely, while the insurance regulation does not require a provision in the policy providing for payment of interest on the entire judgment, Lancer's policy is more generous and clearly provides for the payment of interest on the entire judgment in addition to the payment of the policy limit (see Dingle, supra at 662, fn.2).

For those wondering, that's $191.55 in interest per day. If it was not until mid-2009 that Lancer commenced this DJ action, the interest owed over and above its $100,000 policy limit is approximately $105,000. Yikes.

It's important to note that 11 NYCRR § 60-1.1(b) applies only to an "owner's policy of [automobile] liability insurance" as defined by Vehicle & Traffic Law § 311. There is no similar regulation applicable to non-auto policies. Policy language should control the payment of post-judgment interest under those policies.

Editor's Note ~~ The Appellate Division, Second Department, affirmed this decision on November 30, 2010. Review that decision here.

Wednesday, February 17, 2010

August 21, 2015 ~~ Editor's Note:Unfortunately, as with many ways and means of the World Wide Web, three of the four blogs pictured and discussed below are no longer active. Jason Tenenbaum is still blogging, albeit off his law firm's website, having dropped the somewhat eponymous moniker "No Fault Defender". And Larry Rogak's New York No-Fault Advisor lacks current content, although Larry appears to populate his fully eponymous Rogak Report, still on Yahoo! Groups, with an occasional post.
This post originally appeared on this blog on March 8, 2009. Nearly a year later, there have been some updates I should tell you about.

When I started this blog back in late April of 2008, I knew there would be many New York no-fault insurance cases to digest and post. But with the focus of this blog being on all insurance coverage cases and issues, the volume of no-fault decisions coming out of the New York courts has, at times, been overwhelming.

For those who can't get enough of all things no-fault (an esoteric, excitable and, in many instances, fanatical group), there are currently four blogs in New York dedicated strictly to no-fault, and I encourage my no-fault readers to bookmark and read those blogs regularly.

First in time came It's No-Fault of NY, New York State No-Fault Insurance Law News, Analysis and Commentary, a blog started in March 2006 by Erik Lutwig and Damin Toell. This may have been the very first law blog I started following a few years ago. Damin Toell now writes exclusively for this blog and, after what presumably was a job transition gap from November 2007 through December 2008, resumed posting to that blog in 2009 but stopped again July with, of all thing, a post about this blog. Although Damin has not updated his blog since July of last year, it remains a good archival source of information on New York no-fault cases and issues.

With a born-on date of December 13, 2006, Dave Gottlieb writes the widely read and frequently commented No-Fault Paradise, A Site Devoted to New York & Florida No-Fault Law. Although I, myself, have still never seen a Florida no-fault case posted or discussed in Dave's blog, the blog's tropical name and banner image leave me hopeful that someday I just might. Dave is a prolific blogger, posting approximately 15-20 times per month. There are few if any no-fault cases published in the New York Official Reports from the appellate and trial-level courts that don't get mentioned and posted to Dave's blog. A good place to watch for recent New York no-fault decisions.

Also redesigned since last March is what was then our most recent entry into the New York no-fault blogosphere. Originally launched in October 2008, No Fault Law - A Defense Attorney's Perspective on New York No-Fault Lawis written by the self-outed Jason Tenenbaum, recently of his own shingle. Jason is also a prolific blogger, and his posts range beyond just New York no-fault decisions. His highly academic and informative blog now averages over 15-20 posts per month.

The most recent arrival to the New York no-fault blog party is another blog from my law firm, launched in December 2009. Arbiters of NY No-Fault treats just New York no-fault arbitration decisions and issues, and my associates, Bethany Mazur and Scott Mancuso, are my co-authors of that blog. Approximately 12-15 posts per month so far. Check it out.

Word on the street is that there soon will be yet another New York no-fault cogitator entering the blogosphere. Larry Rogak of The Rogak Report e-newsletter reknown has announced that his e-newsletter will soon reside within the e-body of a blog to be called the New York No-Fault Advisor. Look for that blog soon.

To assist those who research no-fault cases and issues, I've created a Google Custom New York No-Fault Search Engine for these four blogs, plus this one. You can access and bookmark it here or by using the gadget on the toolbar to the right. Any of you who work in the New York no-fault field should bookmark that link and use it often. It'll be much faster than searching each blog separately. I'll add Larry Rogak's blog to that custom search engine once it's launched.

Personal auto insurers take note. Here's the case you want when you head to small claims court to seek dismissal of actions brought by third-party claimants -- not your insureds -- directly against you, rather than against your insureds, for either an allegedly inadequate property damage settlement offer or an allegedly inadequate payment. The argument goes like this: "Your Honor, in the case of Falco v. Allstate, the Appellate Division, Fourth Department, recognized that a third-party claimant has no privity or legal standing to maintain a breach of contract action against the alleged tortfeasor's personal auto insurer." [Hand copies of the decision to the judge and claimant or claimant's counsel.]

Allstate's insured rear-ended the plaintiff Vincent Falco's 1997 Honda Accord. Allstate made offers of $6,125 and $7,000 to Falco for the damage to his vehicle, which Falco rejected. Falco ultimately made a claim to and received a payment of $8,180 for the damage from his own collision insurance company, State Farm. Falco then brought this suit against Allstate, alleging that Allstate violated New York General Business Law § 349 by having offered him a "low-ball" figure of $6,125 and by having engaged in a scheme through delays, false standards and unfair practices to frustrate and discourage Falco into accepting Allstate's "low-ball" offer for the damages to his vehicle. Falco's complaint also asserted a breach of contract cause of action against Allstate, although it lacked any factual allegations of there having been any written or oral contract between the parties.

Allstate made a motion to dismiss Falco's complaint pursuant to CPLR Rule 3211(a)(7), arguing that the complaint failed to state a legally cognizable claim upon which relief could be granted. Monroe County Supreme Court granted Allstate's motion with respect to the complaint's GBL § 349 cause of action, but denied it with respect to the breach of contract cause of action. Both parties appealed.

In MODIFYING the order appealed from to grant Allstate's motion to dismiss the breach of contract action, as well, the Fourth Department held:

Even accepting all of the facts alleged by plaintiff in his complaint as true and according him the benefit of every favorable inference, as we must in the context of defendant's motion to dismiss the complaint pursuant to CPLR 3211 (a) (see Leon v Martinez, 84 NY2d 83, 86-87; Kumar v American Tr. Ins. Co., 49 AD3d 1353, 1354), we conclude that Supreme Court properly granted that part of defendant's motion seeking dismissal of the cause of action alleging the violation of General Business Law § 349. Plaintiff failed to allege that "the acts or practices [complained of] have a broader impact on consumers at large" and thus failed to state a cause of action for the violation of that statute (Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 25). We agree with defendant, however, that the court erred in denying that part of its motion seeking dismissal of the breach of contract cause of action, thereby granting the motion in its entirety. Plaintiff failed to allege facts sufficient to establish the existence of any agreement between the parties or between defendant and plaintiff's insurer. Thus, plaintiff failed to state a cause of action for breach of contract, inasmuch as "no contract of any kind exists between plaintiff and defendant and there is no recognized theory upon which defendant . . . might be held liable to plaintiff, as a third-party beneficiary" (Area Masonry v Dormitory Auth. of State of N.Y., 64 AD2d 810, 811). We therefore modify the judgment and order accordingly.

What we've been telling small claims court judges for years. No contract. No privity. No maintainable action by the third-party claimant directly against the alleged tortfeasor's personal auto insurer. Claimants unhappy with an offer from the tortfeasor's insurer can either accept their own collision insurer's payment (in which case the collision insurer would become subrogated to the tort claim) or sue the alleged tortfeasor directly for damages, thereby requiring the tortfeasor's personal auto insurer to defend and potentially indemnify the tortfeasor. But the claimant can't accept payment from his own collision carrier and then sue the adverse vehicle's insurer directly. This case says so.

My thanks to Mary Ann Pierino from Kristen Degnan's office, who represented Allstate, for faxing me the statement of facts from Allstate's appellate brief so I could fill in the facts.

Midrox's insured, Ronald Blodgett, was driving a pickup truck between Blodgett's main farm and leased farm property, which were approximately nine miles apart, when he collided with a motorcyclist, Charles McLaughlin. The incidental liability provisions of Blodgett's policy with Midrox covered liability for bodily injury and property damage that "occurs on the insured premises and results from the ownership, maintenance, use, loading or unloading of . . . motorized vehicles not subject to motor vehicle registration because of their type or use . . . ." Pursuant to the policy, the "[i]nsured premises" included Blodgett's main farm as identified in the "Described Location" section as well as "any premises used . . . in connection with the described location," the "approaches and access ways immediately adjoining the insured premises," and "other land [the insured] use[s] for farming purposes[.]"

Midrox disclaimed coverage for the accident under Blodgett's farmowner's policy on the ground that the accident had occurred off the "insured premises" while Blodgett was operating a vehicle subject to motor vehicle registration. McLaughlin's underlying personal injury action ultimately settled, and judgment was entered against the Blodgett defendants in the amount of $1 million. When Midrox did not respond to McLaughlin's demand for payment of the judgment pursuant to New York Insurance Law § 3420(a)(2), McLaughlin commenced this action to require Midrox to pay the judgment.

McLaughlin moved and Midrox cross-moved for summary judgment. Ontario County Supreme Court granted plaintiff's motion in part and denied Midrox's cross motion, finding there to be a question of fact whether the accident occurred on insured premises. Following an evidentiary hearing, the trial court determined that the policy provided coverage for the accident and that Midrox was obligated to pay McLaughlin $1 million. Midrox appealed.

In AFFIRMING the judgment against Midrox, the Fourth Department agreed with the lower court that: (1) the various definitions of "insured premises" were "broad enough to include public roadways used by the insured to transport workers and materials between the insured's farms"; and (2)because the pickup truck was used exclusively for farm purposes and the accident occurred along the most direct route between the two farm parcels, the pickup truck was not subject to regular motor vehicle registration because of its exclusive use as a farm vehicle:

Midrox contends that its policy does not provide coverage because the accident occurred on a public roadway while Ronald Blodgett was driving a pickup truck. We reject that contention. In Nationwide Mut. Ins. Co. v Erie & Niagara Ins. Assn. (249 AD2d 898), we interpreted a farmowner's insurance policy that was substantially similar, if not identical, to the Midrox policy. There, the insured's employee was involved in an accident on a public roadway while driving a pickup truck between two farms operated by the insured (id. at 898). We further concluded that the various definitions of "insured premises" were "broad enough to include public roadways used by the insured to transport workers and materials between the insured's farms" (id.). Here, the record establishes that, at the time of the accident, Ronald Blodgett was driving the pickup truck between the Blodgett defendants' main farm and leased farm property, which were approximately nine miles from each other.

We further reject the contention of Midrox that our decision in Nationwide Mut. Ins. Co. does not apply because the pickup truck was registered as an agricultural truck (Vehicle and Traffic Law § 401 [7] [E]) rather than as a farm vehicle (§ 401 [13]). The Blodgett defendants had the option of registering the truck as either a farm vehicle or an agricultural truck, and the fact that they elected to register the truck as an agricultural vehicle does not, in our view, deprive them of coverage under the policy inasmuch as the pickup truck was used exclusively for farm purposes and the accident occurred along the most direct route between the two farm parcels. Thus, the pickup truck was not subject to regular motor vehicle registration because of its exclusive use as a farm vehicle (see Nationwide Mut. Ins. Co., 249 AD2d at 898).

There is likewise no merit to the contention of Midrox that the term "premises" within the meaning of the policy is not intended to encompass public roadways. That restrictive interpretation is not supported by the language of the policy, which neither defines "premises" nor excludes public roadways from its purview (cf. Estate of Belmar v County of Onondaga, 147 AD2d 900, lv denied 74 NY2d 612). Construing the policy in favor of the insureds and resolving all ambiguities in the insureds' favor, as we must (see United States Fid. & Guar. Co. v Annunziata, 67 NY2d 229, 232), we conclude that the accident occurred on the "insured premises" within the meaning of one or more of the policy's alternative definitions of that phrase (see Nationwide Mut. Ins. Co., 249 AD2d at 898).

With no information about McLaughlin's injuries or the lower court's rulings other than what is reflected in this decision, it is difficult to say whether Midrox should have considered providing a gratuitous defense to its named insureds in the underlying action while commencing a declaratory judgment action to confirm its disclaimer. Disclaiming and walking away leaves insureds free to defend or not defend underlying personal injury or property damage actions and potentially enter into million dollar settlements as they see fit.

Jason Webb borrowed a loaner vehicle from Burdick Pontiac-GMC while his own vehicle was being repaired by the car dealership. His son, Justin Webb, was driving the loaner vehicle when he collided with a vehicle operated by Andrea Walker. Walker thereafter commenced the underlying against Justin Webb and Burdick seeking damages for injuries that she allegedly sustained in the accident.

The loaner vehicle was insured under a garage liability policy issued to Burdick by Harco National Insurance Company, and the Webbs were insured under a family motor vehicle policy issued by plaintiff, Progressive Casualty Insurance Company. The Harco policy contained what is commonly known as a "no liability clause," which provided coverage to a customer of its insured only if the customer "[h]as no other available insurance (whether primary, excess or contingent)" or "[h]as other available insurance (whether primary, excess or contingent) less than the compulsory or financial responsibility law limits where the covered auto' is principally garaged." The Progressive policy contained an "excess" clause, which stated that any insurance provided for a vehicle, other than a covered vehicle, "will be excess over any other valid and collectible insurance."

Progressive commenced this action seeking a declaration that Harco was obligated to provide primary coverage to defend and indemnify Justin Webb in the underlying action, and Harco asserted a counterclaim seeking a declaration that Progressive is the primary insurance carrier for Webb and thus was obligated to defend and indemnify him to the limits of its policy. Onondaga County Supreme Court granted Progressive's motion for summary judgment declaring that Harco was obligated to provide primary coverage to Justin Webb and that Progressive's coverage was excess to Harco's. Harco appealed.

In REVERSING the order appealed from and declaring that Progressive owed primary coverage to Justin Webb and Harco owed no coverage, the Fourth Department gave effect to the no liability clause of the Harco policy:

We agree with Harco and Burdick that the Webb defendants are excluded from coverage pursuant to the express terms of the Harco policy. Under the Harco policy, a customer is excluded from the definition of an "insured" unless the customer possesses insufficient insurance to meet the minimum requirements set forth in New York's financial responsibility laws. In granting the motion of Progressive, the court relied on the general rule that, "[i]n cases in which one insurance policy has a no liability clause and the other insurance policy has an excess clause, . . . the no liability clause is not given effect" (Kipper v Universal Underwriters Group, 304 AD2d 62, 65; see Utica Mut. Ins. Co. v Travelers Ins. Co., 213 AD2d 983, 984). That was error, inasmuch as "[a]n exception to the general rule arises [where, as here,] the no liability clause expressly provides that other available insurance' includes both primary and excess insurance coverage. In that case, the no liability clause is given effect and the excess insurance carrier is the primary carrier" (Kipper, 304 AD2d at 65; see Mills v Liberty Mut. Ins. Co., 36 AD2d 445, affd30 NY2d 546;Davis v De Frank, 33 AD2d 236, 241,affd27 NY2d 924). Here, the Harco policy specifically provides that "other available insurance" includes "primary, excess or contingent insurance" (emphasis added), and it is undisputed that the liability limits contained in the Progressive policy exceed the minimum statutory requirements. Thus, the exception to the general rule applies, the no liability clause contained in the Harco policy is given effect, and Progressive is the primary insurer for the Webb defendants (see Davis, 33 AD2d at 241).

The appellate court also rejected Progressive's argument that the "Other Insurance" clause of the Harco policy rendered Harco liable for coverage in this case:

Contrary to the contention of Progressive, that clause does not in fact render Harco liable to provide insurance coverage with respect to all vehicles owned by Burdick. Rather, it simply clarifies that, where coverage exists under the substantive provisions of the Harco policy, coverage is primary with respect to all vehicles owned by Burdick and excess with respect to non-owned vehicles.

Finally, and although the court twice stated that Justin Webb was "excluded" from coverage pursuant to the Harco policy's restrictive definition of an insured, the Fourth Department also rejected Progressive's contention that Harco had a duty to provide a timely disclaimer for the subject accident:

Finally, because the Harco policy does not provide coverage for the Webb defendants, there is no merit to Progressive's contention that Harco had a duty to provide a timely disclaimer for the subject accident (see State Farm Mut. Auto. Ins. Co. v John Deere Ins. Co., 288 AD2d 294, 297). Thus, even assuming, arguendo, that the written disclaimer provided by Harco was insufficient, we conclude that "the failure to disclaim coverage does not create coverage which the policy was not written to provide" (Zappone v Home Ins. Co., 55 NY2d 131, 134).

I'm confused. Why would Walker have sued the father, Jason Webb? This decision contains contradictory references (compare "Walker thereafter commenced the underlying action against Justin Webb and Burdick seeking damages" to "Harco is not obligated to defend or indemnify the Webb defendants in the underlying action"). In all likelihood, Jason Webb was not named as a defendant in the underlying action, only his son, Justin Webb, was as the loaner vehicle's driver, along with the vehicle's owner, Burdick. And Justin was not Burdick's customer; his father, Jason, was. Shouldn't that have made a difference? If Justin wasn't Burdick's customer, the "your customers" exception to coverage for permissive users of Burdick's vehicles should not have applied. Surely Progressive argued that point, but, as sometimes happens, the Fourth Department did not address it, like it had in its decision in Graphic Arts Mut. Ins. Co. v Russell, 50 AD3d 1611 (4th Dept. 2008).

On February 23, 2007, Lehigh Construction Group received suit papers from an employee of a subcontractor who allegedly had been injured on a construction site on which Lehigh had been acting as the general contractor. Although Lehigh had been named as an additional insured on the subcontractor's CGL policy with Lexington, Lehigh did not notify Lexington of the occurrence until April 17, 2007 and did not forward a copy of the complaint to Lexington until May 8, 2007. Lexington's policy required notice of an occurrence, claim or suit "as soon as practicable".

By letter dated May 15, 2007, Lexington denied defense and indemnification coverage to Lehigh in relation to the underlying action based upon Lehigh's failure to provide notice of its receipt of the complaint as soon as practicable. Lehigh commenced this declaratory judgment action, attempting to excuse its delay in forwarding the complaint by arguing that its delay was based upon a reasonable belief in nonliability, namely, because it was only a "pass through" defendant with respect to the underlying action. Erie County Supreme Court denied Lexington's motion for summary judgment based on its determination that there were issues of fact regarding whether Lehigh's notice to Lexington was timely.

In REVERSING the order appealed from and granting summary judgment to Lexington, the Appellate Division, Fourth Department, held that plaintiff's assumption that other parties would bear the ultimate responsibility for the underlying plaintiff's injuries was an insufficient excuse for failing to provide Lexington with timely notice of the underlying action's commencement. The appellate court ruled that although an insured's good faith belief in nonliability may excuse that insured's failure to provide timely notice of an occurrence, Lehigh's asserted belief in nonliability was an "insufficient excuse" for its late notice of the lawsuit:

In opposing the motion, plaintiff contended that its delay was based upon a reasonable belief in nonliability because it was only a "pass through" defendant with respect to the underlying action. Although a good faith belief in nonliability may excuse a failure to provide timely notice of an occurrence (see Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 NY3d 742, 743), here there was a failure to provide timely notice of the actual commencement of the underlying action. We thus conclude under these circumstances that, as a matter of law, plaintiff's assumption that other parties would bear the ultimate responsibility for Sherk's injuries is an insufficient excuse for failing to provide Lexington with timely notice of the fact that the underlying action had been commenced (see Philadelphia Indem. Ins. Co. v Genesee Val. Improvement Corp., 41 AD3d 44, 47).

The Fourth Department further held that Lexington's disclaimer, issued after Lexington's investigation of the matter and within four weeks of its first notice of the accident and underlying action, was timely as a matter of law.

Pay attention. This appears to be a new rule, at least in the Fourth Department. An insured's asserted good faith belief in nonliability will not serve to excuse its failure to comply with a liability insurance policy's timely notice of claim or suit condition. That excuse will only apply to the insured's failure to comply with the policy's notice of accident or occurrence condition. Remember -- most liability policies contain tandem but distinct notice conditions: (1) notice of accident or occurrence; and (2) notice of claim or suit. In the opinion of the Fourth Department, an insured's asserted good faith belief in nonliability applies only to the former condition, not the latter.

An insurance actuary of one of your readers' companies could probably tell me what the chances are of seeing two reported decisions on the issue of supplementary uninsured motorists (SUM) or underinsured motorists coverage for volunteer firefighters in the span of two weeks. Matter of American Alternative Ins. Corp. v. Pelszynskiout of Suffolk County Supreme was the first; here's the second.

Volunteer firefighter James Gallagher had ridden to the scene of a motor vehicle accident on his fire company's truck. Upon arrival, he exited the truck and, at the time of the accident that led to his injuries, was directing traffic away from the original accident scene. The relevant SUM endorsement defined an insured as "[y]ou, as the named insured" and "[a]ny other person while occupying . . . [a] motor vehicle insured for SUM under this policy." The SUM endorsement also defined "occupying" as "in, upon, entering into, or exiting from a motor vehicle."

Republic Franklin, the volunteer fire company's business auto insurer, denied SUM coverage to Gallagher, and he sued for that coverage, arguing alternatively that he qualified as an "insured" under the policy's SUM endorsement or that he was "occupying" the SUM-covered fire truck at the time of his accident. Wayne County Supreme Court denied both parties' motions for summary judgment, and both parties appealed.

In REVERSING the order appealed from insofar as it had denied Republic Franklin's motion for summary judgment, the Appellate Division, Fourth Department, held that: (1) Gallagher was not a named insured under the policy because the "[y]ou" in the SUM endorsement referred only to the fire company and did not also refer to an employee of the company; and (2) Gallagher was not "occupying" the fire truck at the time of his accident because his conduct in directing traffic was unrelated to the truck and was not incidental to his exiting it:

Addressing first plaintiff's cross appeal, we conclude that the court properly determined that plaintiff is not a named insured under the policy. The named insured was the fire company, and thus "[y]ou" in the SUM endorsement referred only to the fire company and did not, as plaintiff contends, also refer to an employee of the company (see Buckner v Motor Veh. Acc. Indem. Corp., 66 NY2d 211, 214; Matter of Coregis Ins. Co. v Miceli, 295 AD2d 511). Addressing next defendant's appeal, we agree with defendant that the court erred in determining that there is an issue of fact whether plaintiff was covered under the policy as a person occupying the truck. At the time of the accident, plaintiff had exited the fire company's truck and was directing traffic away from the scene of a motor vehicle accident. Plaintiff's conduct in directing traffic was "unrelated to the [truck]" and was not incidental to his exiting it (Matter of Travelers Ins. Co. [Youdas], 13 AD3d 1044, 1045). Thus, under the facts of this case, plaintiff was not "occupying" the truck within the meaning of that term in the policy (see Matter of Martinez, 295 AD2d 277, 278; Coregis Ins. Co., 295 AD2d at 511).

Does this decision conflict with and, as it's from the Appellate Division, override the Pelszynski decision? One could argue either way. The holding in Pelszynski turned not on the meaning of "you" as used in the first part of the SUM endorsement's definition of "insured", but on subpart 2.(b) of that definition. Moreover, "occupying" was not at issue in Pelczynski. Read literally, however, the Fourth Department's statement that "'[y]ou' in the SUM endorsement referred only to the fire company and did not, as plaintiff contends, also refer to an employee of the company" could be construed to conflict with the holding in Pelszynski.

Waiting 54 days to issue a late notice disclaimer is not "as soon as is reasonably possible", as required by Insurance Law § 3420(d)(2), holds the Appellate Division, Second Department, in this decision. In AFFIRMING Kings Supreme's award of summary judgment to the insured on its cross claim for declaratory judgment, the Second Department also found that Sirius American Insurance Company failed to raise a triable issue of fact with sufficient proof that it had mailed an earlier disclaimer letter -- only 11 days after having gained sufficient knowledge of facts entitling it to disclaim -- by certified mail, return receipt requested. An affidavit from a claims representative who did not have personal knowledge of the mailing of the earlier disclaimer letter, coupled with the certified mail receipt, standing alone, were found insufficient to raise a triable issue of fact as to actual mailing of the earlier disclaimer letter:

The defendant Finaly General Contracting Corp., a/k/a Finaly General Contractors, Inc. (hereinafter Finaly), established its prima facie entitlement to judgment as a matter of law on its cross claim for declaratory relief against the defendant Sirius America Insurance Company (hereinafter Sirius) by demonstrating that Sirius did not disclaim coverage "as soon as is reasonably possible" (Insurance Law § 3420[d][2]; see Sirius Am. Ins. Co. v Vigo Constr. Corp., 48 AD3d 450, 452). Finaly showed that Sirius had "sufficient knowledge of facts entitling it to disclaim" by June 10, 2005, at the latest, and that Sirius did not disclaim until August 3, 2005 (see First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 66). In opposition, Sirius failed to raise a triable issue of fact as to whether it sent an earlier disclaimer letter on June 21, 2005, by certified mail, return receipt requested (see Rael Automatic Sprinkler Co., Inc. v Schaefer Agency, 52 AD3d 670, 673). "Generally, proof that an item was properly mailed gives rise to a rebuttable presumption that the item was received by the addressee'" (New York & Presbyt. Hosp. v Allstate Ins. Co., 29 AD3d 547, 547, quoting Matter of Rodriguez v Wing, 251 AD2d 335, 336). "The presumption may be created by either proof of actual mailing or proof of a standard office practice or procedure designed to ensure that items are properly addressed and mailed" (Residential Holding Corp. v Scottsdale Ins. Co., 286 AD2d 679, 680). Sirius offered no evidence as to its standard office practices for mailing disclaimer letters, and the affidavit of a claims representative was insufficient to raise a triable issue of fact since he did not have personal knowledge of the mailing of the disclaimer letter (see New York & Presbyt. Hosp. v Allstate Ins. Co., 29 AD3d at 547; Tracy v William Penn Life Ins. Co. of N.Y., 234 AD2d 745, 748). The certified mail receipt, standing alone, was insufficient to raise a triable issue of fact as to actual mailing (see New York & Presbyt. Hosp. v Allstate Ins. Co., 29 AD3d at 548; Matter of State Farm Mut. Auto. Ins. Co. [Kankam], 3 AD3d 418, 419; cf. Westchester Med. Ctr. v Liberty Mut. Ins. Co., 40 AD3d 981, 983). Although issues of fact exist as to whether Finaly provided notice of an occurrence "as soon as practicable" (M & N Mgt. Corp. v Nationwide Mut. Ins. Co., 307 AD2d 257, 258), Sirius's "failure to provide notice of disclaimer as soon as is reasonably possible precludes effective disclaimer, even where the insured's own notice of the incident is untimely" (Tex Dev. Co. v Greenwich Ins. Co., 51 AD3d 775, 778; see Osterreicher v Home Mut. Ins. Co. of Binghamton, N.Y., 272 AD2d 926, 927).

Under New York Insurance Law § 3420(d)(2), an untimely disclaimer or denial will, in effect, excuse an insured's late notice and preclude the assertion of coverage-negating policy exclusions or conditions for bodily injury or death claims arising from New York accidents. With the prevalence of email as a business communication tool, might liability insurers consider obtaining consent and sending disclaimer and denial letters to their insureds via email as well as mail? See, NYSID OGC Opinion No. 07-08-17, Electronic distribution by insurers of insurance policies, forms, and bills to insureds ("The Department has consistently encouraged the use of electronic transactions in insurance where there is consent on the part of the insured to enter into an electronic transaction, except to the extent that statutory requirements cannot be satisfied by an electronic transmittal.") But for better proof of the mailing of the June 21, 2005 letter, Sirius might not have been found to owe defense and indemnification to its insured in the underlying personal injury action.

For other untimely disclaimer decisions discussed on this blog, click here.

The Office of General Counsel issued the following opinion on January 28, 2010, representing the position of the New York State Insurance Department.

Re: Clarification of the term “personal injury” as used in the amendments to N.Y. Ins. Law § 3420

Question:

Does the use of the term “personal injury” in N.Y. Ins. Law § 3420(a)(6) (McKinney Supp. 2009) include injury arising out of professional liability?

Answer:

Yes. The term “personal injury” encompasses any injury contemplated as “personal injury liability” under Insurance Law § 1113(a)(13), including injury arising out of professional liability.

Facts:

It is reported that a question has arisen as to whether the term “personal injury” in the 2008 amendments to Insurance Law § 3420 includes injury arising out of professional liability. XYZ Insurance (“XYZ”) submitted a proposed policy endorsement for approval to the Insurance Department for a lawyers professional liability policy. The proposed endorsement does not contain the “notice” and “prejudice” requirements set forth in the 2008 amendments. 1 XYZ believes that Insurance Law § 3420(a) does not encompass professional liability insurance within the definition of “personal injury.” The inquirer asks if XYZ is correct.

Analysis:

Chapter 388 of the Laws of 2008, which amended Insurance Law § 3420, is relevant to the inquiry. Insurance Law § 3420(a)(6) establishes the right to bring a direct action against the insurer under certain circumstances, including a “claim arising out of death or personal injury to any person.” The statute provides that each insurance policy must include:

A provision that, with respect to a claim arising out of death or personal injury of any person, if the insurer disclaims liability or denies coverage based upon the failure to provide timely notice, then the injured person or other claimant may maintain an action directly against such insurer, in which the sole question is the insurer’s disclaimer or denial based on the failure to provide timely notice, unless within sixty days following such disclaimer or denial, the insured or the insurer: (A) initiates an action to declare the rights of the parties under the insurance policy; and (B) names the injured person or other claimant as a party to the action.

The term “personal injury” did not appear in Insurance Law § 3420 before the 2008 amendments, save for the reference in Insurance Law § 3420(e) to “personal injury liability insurance.” However, both prior to and after the 2008 amendments, Insurance Law § 3420(a) has used the term “liability for injury to person” to establish the minimum provisions applicable to liability policies generally. The Department’s Office of General Counsel construes that phrase in tandem with Insurance Law § 1113(a)(13), which defines “personal injury liability insurance” as follows:

[I]nsurance against legal liability of the insured, and against loss, damage or expense incident to a claim of such liability (including the insurer’s obligation to pay medical, hospital, surgical and disability benefits to injured persons, and funeral and death benefits to dependents, beneficiaries or personal representatives of persons who are killed, irrespective of legal liability of the insured), arising out of death or injury of any person, or arising out of injury to the economic interests of any person, as the result of negligence in rendering expert, fiduciary or professional service, but excluding any kind of insurance specified in paragraph fifteen except insurance to protect an insured against liability for indemnification or contribution to a third party held responsible for injury to the insured’s employee arising out of and in the course of employment when such insurance is written pursuant to this paragraph and not written pursuant to paragraph fifteen of this subsection.

Thus, by its very terms, Insurance Law § 1113(a)(13) “personal injury” encompasses injury arising out of economic interests of any person “as a result of negligence in rendering expert, fiduciary or professional insurance...” It defies logic for the insurer to claim that the terms “personal injury” and “injury to person” are not embodied in the definition of “personal injury liability insurance” contained in Insurance Law § 1113(a)(13).

XYZ’s assertion that the terms “personal injury” and “injury to person” should be read narrowly to include only bodily injury is belied by the legislative intent behind the use of those terms. When the Legislature intends a narrower scope than “personal injury,” it clearly says so. For example, the term “bodily injury” is used in Insurance Law § 3420 as follows:

(d) If under a liability policy delivered or issued for delivery in this state, an insurer shall disclaim liability or deny coverage for death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this state, it shall give written notice as soon as is reasonably possible of such disclaimer of liability of denial of coverage to the insured and the injured person or any other claimant.

(f)(1) No policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any natural person arising out of the ownership, maintenance and use of a motor vehicle by the insured…

The use of the term “bodily injury” in both of these sections of Insurance Law § 3420 refers exclusively to physical injury arising out of a motor vehicle accident, and not anything more, like psychological injury or loss of consortium. Thus, the Legislature has recognized a distinction between “bodily injury” and “personal injury” with the former being a sub-category of the latter. See alsoGaouette v. Aetna Life Ins. Co. Of Hartford, Conn., 253 A.D. 388 (2nd Dept. 1938) (holding that an automobile liability policy’s use of the term “personal injury” has a broader application than the term “bodily injury” contained in the same policy).

For further information, you may contact Associate Counsel Alexander Tisch at the New York City Office.

1 The 2008 amendments to Insurance Law § 3420 require property/casualty insurers to include a provision in policies that late notice of claim, with certain exceptions, will not invalidate a claim unless late notice has prejudiced the insurer.

Welcome to Coverage Counsel, where we hope you will find timely and useful information regarding New York state and federal insurance coverage cases and issues.

Coverage Counsel is brought to you by the law firm of MURA & STORM, PLLC with a main office in Buffalo, New York. To contact us, call (716) 855-2800 or email Roy Mura, the editor of this blawg.

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